28/01/2009 - 08:05

Newmont pays $1.6bn for Boddington

28/01/2009 - 08:05

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Newmont Mining Corp is set to take full ownership of the Boddington gold mine following AngloGold Ashanti's decision to sell its one-third interest for $1.6 billion.

Newmont Mining Corp is set to take full ownership of the Boddington gold mine following AngloGold Ashanti's decision to sell its one-third interest for $1.6 billion.

Newmont plans to raise about $US1.2 billion ($A1.81 billion) through public offerings of common stock and convertible notes to fund its purchase of the 33.33 per cent stake.

"We are very pleased to consolidate our interest in Boddington, a world-class asset that we obviously know well," Newmont chief executive and president Richard O'Brien said in a statement.

Newmont boosted its stake in Boddington to 66.6 per cent in early 2006 after acquiring Newcrest Mining's 22.2 per cent interest in the project for $A225 million.

The Boddington operation is a large open pit mine and is expected to start first production in mid-2009.

The project has suffered a series of cost blowouts since construction was approved in February 2006, with Newmont initially estimating a capital cost contribution for its majority stake between $US900 million ($A1.36 billion) to $US1.0 billion ($A1.51 billion).

The company said on Wednesday capital costs for Boddington were expected to be between $US2.6 billion ($A3.92 billion) and $US2.9 billion ($A4.37 billion) on a 100 per cent basis.

Newmont said it expects to incur an additional $US250 million ($A376.9 million) of capital expenditure in 2009 as a result in its increased ownership of Boddington.

AngloGold Ashanti, Africa's largest gold producer, said the sale would strengthen the company's balance sheet and allow for the early repayment of a $US1 billion ($A1.51 billion) bridge facility.

"It is probably the best time to sell an operation when the underlying commodity is more likely to perform strongly and the Aussie dollar gold price is likely to improve," Fat Prophets analyst Gavin Wendt said.

"I think rationalisation of that asset was always on the cards."

Boddington has a mine life in excess of 20 years and is expected to produce about one million ounces of gold per year for the first five years of life, before easing to about 850,000 ounces annually.

Meanwhile, Newmont has forecast gold sales of between 5.2 million ounces to 5.5 million ounces this year due to the start-up and increased ownership of Boddington, and increased sales from the Yanacocha mine in Peru and Batu Hijau in Indonesia.

The company sold 5.2 million ounces in calendar 2008.

Newmont shares closed down 51 cents at $6.08 on Wednesday, while AngloGold rose seven cents to $8.30.

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